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Ask HN: How to deal with markets down turn? Feeling down

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Re: Ask HN: How to deal with markets down turn? Feeling down

#181

Earlier quoted context omitted.

The problem is getting out before things drop, and getting back in when the drop is "over": * https://awealthofcommonsense.com/2018/10/the-psychology-of-s... By sitting in cash you're also losing money through inflation: * https://ofdollarsanddata.com/the-cost-of-waiting/ At the end of the day you should always be invested, and if you're worried about market undulations then you should own some bonds. And besides red…

If you cut early and miss the top 5% of profits then buy back in at 5% above the bottom when it rebounds you'll do pretty well.

If you try to miss the bad/worst days you'll probably miss the best days:

* https://theirrelevantinvestor.com/2019/02/08/miss-the-worst-...

* https://aaiila.org/wp-content/uploads/2020/05/Tuchman-Best-a...

* https://www.capitalgroup.com/individual/planning/investing-f...

* https://www.cnbc.com/2021/03/24/this-chart-shows-why-investo...

Re: Ask HN: How to deal with markets down turn? Feeling down

#182

Earlier quoted context omitted.

The problem is getting out before things drop, and getting back in when the drop is "over": * https://awealthofcommonsense.com/2018/10/the-psychology-of-s... By sitting in cash you're also losing money through inflation: * https://ofdollarsanddata.com/the-cost-of-waiting/ At the end of the day you should always be invested, and if you're worried about market undulations then you should own some bonds. And besides red…

By keeping your stocks you lost your money to inflation too, and then another 20+% because you held through a bubble pop. I think a lot of the personal finance investing advice given to people in the vein of “solid advice for 90% of people to follow without too much expertise” is becoming some weird dogmatic religion. You must never time the market (even at a loose monetary policy induced bubble), you must always hol…

> By keeping your stocks you lost your money to inflation too, and then another 20+% because you held through a bubble pop.

By holding stocks and not selling you have lost nothing:

* https://awealthofcommonsense.com/2014/02/worlds-worst-market...

"Losses" only occur when you lock them in. If your trading account is down now you have lost nothing—just like you haven't made money until you sell your holdings for cash.

* https://www.investopedia.com/terms/c/crystallization.asp

Re: Ask HN: How to deal with markets down turn? Feeling down

#183

Earlier quoted context omitted.

Citation: https://www.businessinsider.com/forgetful-investors-performe...

An article from 2015: > Well, maybe. My Fidelity contact has not heard of such a thing, nor has Morningstar's Fidelity Canada contact. Suffice it to say that none of these citations came linked to the original source. (Such is the Internet.) * https://www.morningstar.com/articles/964493/from-the-archive... Unless the citation has fidelity.com in the link (or an archive.org snapshot of said link), I'm calling urban le…

I mean, simple Google produced result I shared, which you might have easily cited to in your original request and added the clarification you just added, but you didn’t do that.

Or strange thought, you could contact Fidelity and ask them yourself — and if it is urban legend, let them know, and suggest them survey their records and see if legend is true — since for sure mainstream media would cover it and given current economy likely be good for business too.

Mean time, no shortage of research on the topic:

https://scholar.google.com/scholar?hl=en&as_sdt=0%2C21&q=Dol...

Re: Ask HN: How to deal with markets down turn? Feeling down

#184
post #81

Earlier quoted context omitted.

What was your motivation to invest in such a way that 95% loss was even possible?

To make money, why else? Look folks, this wasn't my retirement money, it was money I didn't particularly need and had no idea what to do with. It always worked for me before. My investing history is a long string of huge successes beginning in 2014. I've always invested in companies I believed in and that had solid fundamentals. It appears the market doesn't give a shit about company fundamentals right now. Most smal…

Sorry to hear about your losses and this might sound like lecturing but I think it's worth saying.

What price did you pay for those businesses? When you say they had solid fundamentals what does that mean? A pretty common mistake is to overpay for a business with good potential. Unless you have some unique insight everyone already knows the business has potential and it's priced that way. The market as a whole had crazy crazy multiples which means it was overpriced even including the growth prospects. Sure, if you think Tesla can get to a point where it's selling all the cars in the world then you definitely should buy that stock at the price it was trading at.

Overpaying on margin is just compounding your problems. I never ever buy stocks on margin (and generally I avoid borrowing money for anything but the most solid investment, like buying a house). You have to always think about the worse case scenario and be willing to live with it. Ofcourse gambling a lot of money can lead to making a lot of money- it's just that the expected value is negative.

The other thing you always need to consider is how the company you're investing in will perform in an economic downturn. Recessions aren't an if, they're a when. There's a certain chance of recession every year. If you believe the company has strong enough fundamentals to survive a recession and strong enough management/leadership to steer it through difficult times then just hold on. Presumably you have a mix of those so on the aggregate you should do ok. If these great companies are below book price then double down on them but keep in mind the market is disagreeing with your evaluation. Otherwise you've miscalculated the expected value of your investments i.e. your belief in the companies and their fundamentals was incorrect.

Re: Ask HN: How to deal with markets down turn? Feeling down

#185
post #134

Earlier quoted context omitted.

Same here. My biggest bets were facebook, uber, and netflix, and they went down the most. Still, I still think that there’s no way these companies won’t continue their growth so I refuse to sell.

I would not call any of those growth at this point, nor are they companies with strong fundamentals. Like, just my pov - but their years of growth are done and the competition is in.

Facebook has 14% YoY growth, P/S of 3, P/E of 10.6, with 80.5% gross margins. If those don't sound like strong fundamentals, let me know what companies have better metrics, I'd actually be interested...

Re: Ask HN: How to deal with markets down turn? Feeling down

#186
If you're worried about stock options and other Corpo nonsense to such a point if affects your general wellbeing - get some perspective. You're still the top 0.0001% of humans whom even have the opportunity, and you're still not happy.

You've got limited time left to live, do something more meaningful and you won't be worrying about stocks into your 70's.

Re: Ask HN: How to deal with markets down turn? Feeling down

#187
Without any context on the poster (age, net worth, career status, etc) it's not possible to say anything concrete.

So I'll just speculate. Perhaps the poster is young enough to have entered professsional life after the 2008 crash. If so, they have only experienced a bull market going mostly only up with minor blips. But that's not normal, markets also crash and also sometimes meander down for a long while. Don't ever be invested in a way that such an event will be catastrophic to you.

The dot.com crash turned my ~$1M into about 20K. At least they were options, so wasn't money I really ever had in my hand, but it was still a bummer.

Re: Ask HN: How to deal with markets down turn? Feeling down

#188
post #144
post #116

Earlier quoted context omitted.

> To make money Strategies that result in 95 % drawdowns are not in the "making you money" bucket. Since growth is compounding[1], the most important property of a money-making strategy is to keep drawdowns at at optimal level. This optimal level is a thrill ride on its own, but 95 % is plain overbetting and will never make you money in the long run. ---- [1]: If you draw down from 100 to 10, it takes as long to go b…

> Strategies that result in 95 % drawdowns are not in the "making you money" bucket. As long as you're betting with +ev after fees are taken into account then they certainly can make you money. Low sharpe / high vol != unprofitable.

This is correct only if you look at single bets in isolation, or at bets small enough that you can actually make so many of them you get the EV in the end.

Once you look at a long sequence of large bets (where 95 % drawdown absolutely indicates a large bet), you'll find that those where big drawdown can happen grow slower because a big drawdown simply sets you back too far. It's worth earning a little less for each bet if none will cost you a huge loss.

Re: Ask HN: How to deal with markets down turn? Feeling down

#189
post #62

Fidelity did a survey of thier customers whose 401k did the best over the years. The most popular response (about 1/3) was 'I don't have a 401k at fidelity'. They had forgotten about it and left it alone to grow through good and bad. If you know how your investments are doing you know too much

This mentality worked for the past 40 years but it won't work for the next 40 years.

Why

Re: Ask HN: How to deal with markets down turn? Feeling down

#190

My perspective is a bit different since I don't have stock options, just plain retirement and such. So, take this with that in mind. I would recommend giving yourself a break from following it. My reasons for not looking are these: Values of assets change a ton day-to-day, and a year or two from now who knows what it will look like! I also don't have any control over prices. I could shuffle assets around, but again I…

This is something covered very well by Taleb in "Fooled By Randomness." Simply by exposing yourself to random fluctuations on a shorter cadence, you are experiencing stress reactions that would never occur if you checked it on a less frequent cadence. Anyone who has played fantasy football will be familiar with this. If you check your players' scores every five minutes, it is infinitely more stressful than just check…

Also why defaulting to hooking up mothers in labour to continuous monitoring is a bad idea. Better, unless something else is medically called for, to check in at sparser intervals instead.

Also a good reason not to get these "breathing monitors" for infants, again, unless medically indicated.

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